Wisconsin native, conservative critic of everything.
"Once abolish the God, and the government becomes the God." ---G K Chesterton
"The only objective of Liberty is Life" --G K Chesterton
"Fallacies do not cease to be fallacies because they become fashions" --G K Chesterton
"A man can never have too much red wine, too many books, or too much ammunition." -- Rudyard Kipling

Thursday, November 11, 2010

On the Real World of Prices

Here's a first-person narrative on the effects of --take your choice-- un- and under-employment or inflation. (Or both.) It begins with the Palin/WSJ/Krugman yappaflappa, and gets to this:

I stocked up on groceries this morning – an outing I am consciously stretching the intervals between – and can vouch that the price of almost everything I normally buy has gone up since I last bought it. Some of the increases were substantial (e.g., a half-gallon of milk from $1.56 to $1.92).

The store has stopped carrying some brands – especially of locally-produced items like milk and bread – either because the supplier is no longer selling in this area, or because the store can’t charge enough to make that vendor’s product worth carrying. Shelves are more likely now than ever before to have empty spots where stock hasn’t been replaced. For most of my life, that has literally never been a problem unless there’s been a hurricane or other natural disaster. Even Wal-Mart carries less stock than it used to. Aisles that used to be impassable because of big, imposing center-aisle displays are wide and clear. On two subsequent trips there, spanning a period of more than a month, I found the stock of Scotch-Brite sponges unreplenished, something I have never encountered before.

One of my frequent commenters posted a link to a St Louis Fed chart (this thread) which seems to quash the notion of 'food inflation.' And another frequent commenter promptly asked whether commenter #1 has spent any time in a food store lately.

And THIS is all prior to an inflation which has yet to really bite, as food-commodities have only begun their price-ascent.

Well. I can say with certainty that at least one food retailer in this market is getting hammered on its margins (but I can't say much more than that.) So something's going on here.

As I've said before, I don't usually focus on anecdotal evidence. People have a tendency to only focus on higher prices while ignoring prices that have gone down. Maybe you buy a lot of bananas and not a lot of milk. I don't know. It doesn't make any difference.

Days like today are why we shouldn't focus too much on a few hundred million dollars of asset purchases by the Fed. over a 7 month period boosting commodity prices. And it's also why commodity prices are a rather inaccurate indicator of inflation inertia.

No one ever talks about days like today. They talk about record sugar prices, but seem to leave out wild 12% swings to the downward.